Sunday, 6 November 2016

Will The Privatisation Wave Happening In Singapore’s Stock Market Hurt Or Help Investors?

The wave of privatisations happening in Singapore’s stock market does
not seem to be abating. Many well-known listed companies in Singapore
have been delisted in recent years. Here are just a few of the major
privatisations that have happened since 2009.

Goodpack

Cerebos Pacific

Asia Pacific Breweries

Keppel Land

CapitaMalls Asia

Neptune Orient Lines

Tiger Airways Holdings

OSIM

SMRT Corporation

Just last week, Super Group Ltd (SGX: S10) received a buyout offer. Super Group has been a recommendation of The Motley Fool Singapore’s premium Stock Advisor Gold service since June 2016.

Partly due to the availability of cheap financing, privatisations and
mergers can make sense for the major shareholders of companies involved
in deals.

But, is this wave of privatisations a good or bad thing for minority
investors in Singapore’s stock market? Here are two perspectives on how
we can view the current developments.

The pessimistic view

The general view that I am getting when talking to other investors is
that this wave of privatisations is hurting investors as more and more
good companies are disappearing from Singapore’s stock market.

The pessimistic view worries that the market may eventually be left with only low-quality companies.

The optimistic view

On the other hand, the recent privatization wave may be good for
investors. This is because the Singapore market is generally trading at a
lower valuation when compared to its regional peers. This could be due
to the slowdown in Singapore’s economic growth and/or the slump in the
oil & gas and property markets.

But, the privatisations could help investors realize the full
valuation of their investments. Without the privatisations, the
valuation of some companies here may very well have continued to stay
low for extended periods of time.

Moreover, with more and more privatisations happening, some market
participants may feel that investing in Singapore now could give them a
better chance of realizing the full value of their investments due to
takeover attempts. As a whole, this development may rejuvenate interest
in Singapore’s stock market amongst investors.

Summary

There are always two sides to a story. With regards to the
privatisation wave in Singapore’s market, even though the situation may
look bad for investors on the surface, there is still a bright side to
the development.

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